Free cash flow decelerated sharply to $2.33B in 2024 from $4.61B in 2023, a fall of -49.46%, driven by lower operating cash conversion and higher investing and repurchase activity. Net cash provided by operating activities declined to $4.19B in 2024 from $7.03B in 2023, while capital expenditures remained elevated at $1.86B. On a per‑share basis, free cash flow per share TTM is reported at $3.66 and net income per share TTM at $4.22, producing a dividend payout ratio in excess of +111.33% using FY2024 net income per share (4.7 / 4.22 = 1.1133) — a level that is unsustainably high without either improved profitability or external funding sources.

Debt and liquidity metrics matter now more than ever. At year‑end 2024 Phillips 66 held cash and equivalents of $1.74B and total debt of $20.06B, implying net debt of $18.32B. Using FY2024 EBITDA of $5.99B, a simple net‑debt / EBITDA calculation yields ~3.06x (18.32 / 5.99). This is slightly lower than some trailing‑metrics reported elsewhere (e.g., 3.25x reported on a TTM basis) because timing differences and trailing adjustments alter denominators; both measures, however, place PSX squarely in a mid‑cycle leverage range where discipline on capital allocation is required.

Table: Income statement evolution (2021–2024)#

Year	Revenue (B)	Gross Profit (B)	Operating Income (B)	Net Income (B)	EBITDA (B)	Net Income Margin
2024	143.12	4.86	2.32	2.12	5.99	1.48%
2023	147.26	11.29	8.27	7.00	12.37	4.76%
2022	170.12	12.77	10.07	11.02	16.91	6.48%
2021	111.94	3.38	1.23	1.31	3.95	1.17%

All figures above are from Phillips 66 FY income statements (reported currency USD) with margins computed as net income divided by revenue. The table highlights the dramatic compression in profitability between 2023 and 2024.

Balance sheet and cash‑flow dynamics: shrinking liquidity and active capital returns#

The balance sheet shows a material reduction in cash and a modest rise in net debt between 2023 and 2024. Total assets declined slightly to $72.58B from $75.50B while shareholders’ equity moved to $27.41B. Cash fell from $3.32B at the end of 2023 to $1.74B at the end of 2024 (a decrease of $1.58B), while net debt rose from $16.04B to $18.32B. Despite weaker cash flow, PSX returned $5.33B to shareholders in 2024 through dividends ($1.88B) and buybacks ($3.45B), exceeding operating cash generation for the year — a dynamic that helps explain the cash decline and necessitates clarity on near‑term capital allocation priorities.

Operating cash flow of $4.19B covered a portion of investing and financing uses but left the company reliant on runway flexibility. Depreciation and amortization remained a meaningful non‑cash addback at $2.40B, supporting EBITDA convertibility but not immediate liquidity. Phillips 66’s capital program continues to focus on renewable projects and midstream expansions, implying sustained near‑term capital intensity even as returns remain uncertain.

Table: Balance sheet & cash‑flow summary (2021–2024)#

Year	Cash (B)	Total Assets (B)	Total Debt (B)	Net Debt (B)	FCF (B)	Dividends (B)	Share Repurchases (B)
2024	1.74	72.58	20.06	18.32	2.33	1.88	3.45
2023	3.32	75.50	19.36	16.04	4.61	1.88	4.01
2022	6.13	76.44	17.19	11.06	8.62	1.79	1.51
2021	3.15	55.59	14.74	11.59	4.16	1.58	0.00

Source: Phillips 66 FY balance sheet and cash‑flow statements. Net debt equals total debt minus cash and cash equivalents; free cash flow equals cash from operations minus capital expenditures, per the company report.

Strategic pivot: the Los Angeles refinery closure and renewable focus — quantified implications#

The strategic decision to wind down the Los Angeles refinery (139,000 bbl/d) is both symbolic and economically meaningful. That single site represents a tangible reduction in capacity that materially alters West Coast supply dynamics. The draft strategic narrative notes the closure removes roughly 17% of California’s refining capacity and about 11% of PADD 5 capacity; whether Phillips 66 captures any benefit from regional margin tightening depends on the company’s remaining throughput, commercial flexibility and ability to monetize higher‑value outputs such as renewable diesel and SAF from RREC.

The pivot requires capital to be redeployed: renewable projects are capital‑intensive up front and can carry early‑stage operating losses — a dynamic visible in the Rodeo Renewable Energy Complex’s reported transitional losses. Management has signaled prioritization of shovel‑ready renewable investments and selective midstream expansions while shrinking or exiting low‑return refining assets. The company's FY2024 investing spend of $1.86B, and acquisitions and project costs recorded in the cash‑flow statement, show the pipeline of commitments. The economics of these projects depend heavily on policy credits, renewable fuel spreads and long‑term demand for SAF, meaning execution risk and regulatory risk are now first‑order considerations for valuation of the pivot.

Operationally, decommissioning and remediation of a 650‑acre refinery site will create multi‑year cash needs and timing uncertainty for any monetization of real estate value. The company’s longstanding midstream and marketing network cushions some commercial risk, but converting the strategy into consistent, higher‑quality cash flow requires execution on both project delivery and cost control.

Competitive positioning: midstream strength vs refining cyclicality#

Phillips 66’s competitive story rests on an integrated set of capabilities: refining, midstream (pipelines and terminals), chemicals and marketing. The pivot toward renewables and midstream leans into the parts of the franchise that deliver fee‑based or higher‑margin product streams less exposed to crude refining cycles. As conventional West Coast refining capacity contracts, remaining players could benefit from tighter product balances; however, PSX’s own capacity reductions and outages (notably Bayway operational issues in 2025) limit its ability to fully capture cyclical upside.

Compared with peers that have chosen different exposure mixes, PSX’s bet is to trade some commodity cyclicality for growth in structurally supported renewable diesel and SAF markets. That benefit is not automatic: early losses at renewables and ongoing capex mean that PSX must demonstrate both project economics and operational reliability to win investor confidence. Activist board pressure has increased the probability of faster asset monetization and stricter capital discipline, but execution timing is crucial.

Capital allocation: a tension between returns and transformation#

Phillips 66 returned $5.33B to shareholders in 2024 while booking a material decline in free cash flow. The result: cash and liquidity fell and net debt rose. The company now faces three connected decisions: complete prioritized renewable projects, reduce leverage to a comfortable band, and continue shareholder returns at a sustainable level. The company’s dividend per share TTM remains $4.70, producing a yield near +3.60% on current price levels, but the payout is currently consuming more than the company’s underlying net income and free cash flow — a structural tension that must be resolved.

Practical balance‑sheet math matters. If PSX continues to repurchase stock at scale while delivering lower free cash flow, net debt will increase or cash will be depleted; if asset sales are completed as signaled, proceeds could fund renewables and stabilize leverage. Activist influence increases the likelihood of accelerated monetizations, but monetization timing and the market’s appetite for large, coastal energy assets remain uncertain.

Quality of earnings and near‑term outlook#

Examining the quality of FY2024 results shows that operating cash flow ($4.19B) exceeded net income ($2.11B), indicating reasonable cash conversion despite lower net income, and non‑cash D&A remained significant ($2.40B) supporting EBITDA. However, recurring capital commitments to renewables and the decision to run down the Los Angeles refinery will press utilization and margins in the near term. The 2025 quarterly surprises — a mix of beats and misses — show volatility in quarterly results and emphasize the need to watch operating metrics (utilization, retail and marketing margins, renewable yields and credit monetization) rather than rely on headline earnings.

Key near‑term indicators to watch include quarterly refinery utilization and throughput, renewable segment margins (including credit monetization for low‑carbon fuels), Bayway restart timing and costs, and the pace and proceeds of any asset monetizations. The combination of these items will determine whether FY2025 and FY2026 cash flows stabilize or remain volatile.

What This Means For Investors#

Phillips 66 is in a clear transition: management is shrinking exposure to low‑return, high‑cost refining in California while redeploying capital into renewable diesel, SAF and midstream businesses that carry policy support and potentially higher long‑term margins. In the near term, investors should expect continued earnings volatility, compression of free cash flow, and a delicate balance between project funding and shareholder returns. The company’s leverage (net debt to FY2024 EBITDA ~3.06x) and a payout ratio above +111.33% demand credible, timely asset monetizations or a rapid recovery in renewable economics to make the pivot value‑accretive in investors’ time horizons.

For those tracking the story, several data points will be decisive: actual cash proceeds and timing from any announced asset sales, Q‑quarter renewable segment margins and credit flows, the Bayway outage remediation plan and costs, and quarterly free cash flow evolution relative to dividend and buyback activity. Positive surprises on any of those axes would materially reduce execution risk; conversely, longer delays or lower renewable spreads would amplify capital allocation pressure.

Conclusions: a transformation with measurable execution hurdles#

Phillips 66’s FY2024 financials and the Los Angeles refinery closure together create a high‑stakes transformation. The company recorded $2.12B of net income in 2024 (a -69.77% decline) and free cash flow of $2.33B (a -49.46% decline), even as it accelerates investment into renewables and continues significant shareholder returns that exceeded operating cash flow. The balance sheet is intact but tighter, with net debt of $18.32B and a net‑debt/EBITDA ratio near 3.06x using FY2024 numbers. Those are manageable levels but leave limited margin for misexecution while the company funds a capital‑intensive pivot.

Success hinges on three measurable execution outcomes: (1) timely asset monetizations that materially ease leverage pressure, (2) renewable projects (RREC and others) delivering cost and margin improvements that convert early losses into sustainable cash flow, and (3) stabilization of refining operations and utilization after planned closures and outage remediation. The presence of activist investors increases the probability of faster portfolio actions, but the economics of renewables remain dependent on policy credits and market spreads — variables beyond Phillips 66’s complete control.

Investors must therefore reframe PSX not as a conventional refining peer but as an integrated energy company executing a pivot whose value will be revealed through cash‑flow trajectory, asset sale outcomes and the ability to replace cyclically volatile refining profits with more predictable midstream and renewables margins. The coming 12–24 months will be the critical period during which execution and capital allocation choices either validate the pivot or leave the company exposed to protracted earnings and cash‑flow pressure.

Data sources: Phillips 66 FY2024 financial statements (fillingDate: 2025‑02‑21) and company‑reported segment commentary used for operational details. Where trailing and TTM metrics diverge, calculations in this report use year‑end 2024 totals to compute leverage and margin metrics and call out differences versus published TTM ratios when applicable.